ATHENS (Reuters) - Greek banks made further progress during the fourth quarter in reducing their exposure to doubtful and non-performing loans, central bank data showed on Tuesday.

At the end of December, so-called non-performing exposures (NPEs) - the biggest challenge facing the sector - had fallen by one billion euros to 104.8 billion euros, or 50 percent of banks’ overall loan book, the data showed.

This compares with a target of 50.5 percent, or 105.8 billion euros.

NPEs comprise non-performing loans (NPLs) - past credit due for more than 90 days - and restructured loans likely to turn sour. Cutting them would free up more capital to fund productive sectors of the economy, which is slowly recovering.

Greek lenders had NPEs totalling 14.5 billion euros ($16.32 billion), or 5.5 percent of loans, when the global financial crisis began in 2008.

While NPEs soared to 106.9 billion, or 50.5 percent of loans, at the end of June last year, banks have agreed with European Central Bank regulators to shrink them by 38 percent to 66.7 billion by end-2019, meaning the NPE ratio will fall to 33.9 percent of their loan books.

The agreed targets are back-loaded, meaning most of the reduction will take place next year and in 2019, based on the plan.

Despite the reduction in the fourth quarter, NPEs encompassing mortgages, corporate and consumer loan portfolios remain high across the board, the Bank of Greece said.

While default rates have slowed, it said, they remain higher than the pace of restoring loans back to performing status (cure rate), particularly in the business loan segment.

The main driver behind the NPE reduction has been write-offs, while liquidations, collections and loan sales contributed to a lesser extent, the central bank said.

Tuesday’s data showed banks also beat the reduction target on NPLs, with the ratio coming in at 36.2 percent, or 75.9 billion euros, at the end of December versus a targeted 36.4 percent.

Greece’s four major banks - Piraeus, National, Eurobank and Alpha - and three less systemic banks submit data on nine operational targets.